Bristol and the Natural GridA Capital Partnership ApproachChris CookBristol 21st June 2013
“21stCentury problems cannot be solvedwith 20thCentury solutions”
Market ParadigmsMarket 1.0 – decentralised, disconnected, physicalMarket 2.0 – centralised, connected, intermediated- Debt (Banks) and Equity (Joint Stock Company)- October 2008 – the Market 2.0 paradigm brokeHow do we achieve a resilient Market 3.0 ?
Introduction - ResilienceResilience - the enduring power of a body or bodies fortransformation, renewal and recovery through the flux ofinteractions and flow of eventsResource Resilience – Natural GridFinancial Resilience – Open Capital
Resource Resilience – Natural GridSince 1980 Denmarks GDP rose 78%Energy use has been stableCarbon fuel use has declinedHow did Denmark achieve this?
Resource Resilience - Natural GridLeast Energy Cost principle- not least Danish Krone cost (or least $, € or £ cost)- minimum carbon fuel input for a given output ofelectricity, heat or power- investment in renewables, heat, transport, energyefficiency
Emerging Outcomes of Natural Grid policy- decentralisation- skills base of knowledge and knowhow: eg Vestas isthe biggest global wind turbine manufacturer......in acountry of 6m people- trend to energy security and energy independence- not forgetting........reduction in carbon use
Financial Resilience – Open CapitalPrepay – credit returnable in payment for valueNondominium- People-based (P2P) Credit – Guarantee Society- Asset-based Credit – Capital Partnership
Tax PrepayTax Prepay – credit returnable in payment of taxesTax Return – stock part of tally stick returned to TreasuryRate of Return - rate over time at which stock is returnablefor cancellationeg Prepay £8 for £10 tax - £2 profit 25% pa rate of return- not fixed - depends on existence & quantity of flow
21stCentury PrepayLand – credit returnable in payment for land rental orproduction from landEnergy – credit returnable in payment for energy
Land Prepay – the Value PropositionCommunity- sells rentals forward and locks in price- interest-free loan until prepay unit returned vs rentalOccupier- prepays rental and locks in price
Land Prepay – the Value PropositionInvestor- direct inflation hedge investment in land- Occupiers buy prepay credits from Investors at bestprice below issue price & return against rentalManager- shares in gross rentals or production- interests aligned with Investor- no Principal/Agency problem
Land Partnership - OutcomesSocial Contract - relationship-based not transaction-based“4 Bs” model - costs transformed to revenue sharesNeutral – removes ego and politicsCollaborative - stakeholder interests alignedSustainable - all have interest in minimising cost over time
Energy PartnershipCustodian(Community)Custodian(Community)InvestorInvestorConsumerConsumerPrepay %%ManagerManagerPayment
Energy Prepay – the Value PropositionCommunity- sells energy forward and locks in price- interest-free loan until prepay unit returned vs supplyConsumer- prepays for energy and locks in price
Energy Prepay – the Value PropositionInvestor- direct inflation hedge investment in energy- Consumers buy credits from Investors at best pricebelow physical energy price & return against supplyManager- shares in gross revenues or production- interests aligned with Investor- no Principal/Agency problem
Energy Partnership - OutcomesSocial Contract - relationship-based not transaction-based;costs transformed to revenue sharesNeutrality – removes ego and politicsCollaborative - stakeholder interests alignedSustainable - all have interest in minimising cost over time
Mega Watts and NegawattsMega Watt production of renewable energy sells at thewholesale market bid priceNega Watt production is made by consumers at the retailmarket priceBut Green Deal has two problems- compound interest on bank £ loans- even if £ is saved, no guarantee energy will be saved
Bristol Green DealInvestor paying £1k for Units in Bristol Energy Pool- 20 1Mwh prepay Units @ £50 each- 2000 10 Kwh prepay Units @ 50p eachFund invests at community level through energy loanseg community CHP/co-generationLoan repaid via energy bills through buying prepayenergy units at market priceInterest-free loan – return to investor in energyUnless consumers save energy they will not save £
Bristol Green DealCustodianBristol Energy PoolCustodianBristol Energy PoolInvestorsConsumersManager£ EnergyLoanBuy unitsat market price£PrepayPrepayUnits££
21stCentury problems cannot be solved with 20thcentury solutions.........
…....21stcentury solutions pre-date modern finance